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G.R. No. L-22738 December 2, 1924

ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS, plaintiffs-appellees,vs.THE CENTURY INSURANCE CO., LTD., defendant-appellant.

Eiguren & Razon for appellant. Aurelio Montinola and Jose M. Hontiverso for appellees.

VILLAMOR, J.:

On April 19, 1924, the Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff, sentencing the defendant company to pay him the sum of P45,000, the value of certain policies of fire insurance, with legal interest thereon from February 28, 1923, until payment, with

the costs. The defendant company appealed from this judgment, and now insists that the samemust be modified and that it must be permitted to rebuild the house burnt, subject to thealignment of the street where the building was erected, and that the appellant be relieved fromthe payment of the sum in which said building was insured.

A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, aswell as the goods and merchandise therein contained in the sum of P15,000. The house andmerchandise insured were burnt early in the morning of February 28, 1923, while the policiesissued by the defendant in favor of the plaintiff were in force.

The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the

house burnt, and although the house may be smaller, yet it would be sufficient indemnity to theinsured for the actual loss suffered by him.

The clause cites by the appellant is as follows: lawphi1.net

The Company may at its option reinstate or replace the property damaged or destroyed,or any part thereof, instead of paying the amount of the loss of damages, or may join withany other Company or insurers in so doing, but the Company shall not be bound toreinstate exactly or completely, but only as circumstances permit and in reasonablesufficient manner, and in no case shall the Company be bound to expend more inreinstatement that it would have cost to reinstate such property as it was at the time of the

occurrence of such loss or damage, nor more than the sum insured by the Companythereon.

If this clause of the policies is valid, its effect is to make the obligation of the insurance companyan alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. Itmust be noted that in alternative obligations, the debtor, the insurance company in this case, mustnotify the creditor of his election, stating which of the two prestations he is disposed to fulfill, inaccordance with article 1133 of the Civil Code. The object of this notice is to give the creditor,

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that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn theelection made by the debtor, and only after said notice shall the election take legal effect whenconsented by the creditor, or if impugned by the latter, when declared proper by a competentcourt. In the instance case, the record shows that the appellant company did not give a formalnotice of its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the

proposed reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition, for the reason that the new house would be smaller and of materials of lower kindthan those employed in the construction of the house destroyed. Upon this point the trial judgevery aptly says in his decision: "It would be an imposition unequitable, as well as unjust, tocompel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lowerkind of materials than those of said house, without offering him an additional indemnity for thedifference in size between the two house, which circumstances were taken into account when theinsurance applied for by the plaintiff was accepted by the defendant." And we may add: Withouttendering either the insured value of the merchandise contained in the house destroyed, whichamounts to the sum of P15,000. itc@alf

We find in the record nothing to justify the reversal of the finding of the trial judge, holding thatthe election alleged by the appellant to rebuild the house burnt instead of paying the value of theinsurance is improper. To our mind, the judgment appealed from is in accordance with the meritsof the case and the law, and must be, as is hereby, affirmed with the cost against the appellant.So ordered.